Wage Floors, Imperfect Performance Measures, and Optimal Job Design

Jenny Kragl and Anja Schöttner

No 2012-36, Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz

Abstract: We analyze the effects of wage floors on optimal job design in a moral-hazard model with asymmetric tasks and imperfect aggregate performance measurement. Due to cost advantages of specialization, assigning the tasks to different agents is efficient. A sufficiently high wage floor, however, induces the principal to dismiss one agent or to even exclude tasks from the production process. Imperfect performance measurement always lowers profit under multitasking, but may increase profit under specialization. We further show that variations in the wage floor and the agents' reservation utility have significantly different effects on welfare and optimal job design.

Keywords: Job Design; Limited Liability; Minimum Wage; Moral Hazard; Multitasking; Performance Measurement (search for similar items in EconPapers)
JEL-codes: D82 D86 M51 M52 M54 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2012-12-14
New Economics Papers: this item is included in nep-cta, nep-hrm and nep-lab
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Related works:
Journal Article: WAGE FLOORS, IMPERFECT PERFORMANCE MEASURES, AND OPTIMAL JOB DESIGN (2014)
Working Paper: Wage Floors, Imperfect Performance Measures, and Optimal Job Design (2013)
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